Endava : 5 Ways Banks Can Move Beyond Legacy IT for Competitive Advantage

Banking | Pierre Kovacs |
28 February 2022

When discussing legacy IT with clients, despite wide variations in companies and operating models, the conversations carry a similar theme. Most executives know they need to move away from legacy to gain real competitive advantage. But few feel they can start over in a greenfield situation. Navigating a middle ground between the two, they don't fully reap the benefits of digital while still grappling with the headaches, cost, and inefficiencies of old IT.

Decoupling from legacy systems in the front office has allowed some firms to become somewhat nimble, but the legacy that remains in the back office prevents comprehensive progress and gains.

Increased competition from new corners adds further pressure. Traders and researchers from Global Markets have left their jobs to launch macro hedge funds that trade across asset classes and operate like banks at a fraction of the cost. Every day, they are proving the wisdom of operating at lower platform costs without legacy constraints.

Mid-tier and smaller players built their market platforms by integrating traditional packages. While many players have at least started to focus and simplify their markets businesses, most of them continue to suffer from undue complexity. End users need to juggle multiple applications to perform daily tasks, lacking a timely view of their positions and risks across the firm.

If they could start over, most players would design a one-stack, front-to-back, cross-asset platform. They face a Catch-22 situation: continue to bear outsized platform cost or stomach the investment required to rebuild their platform?

PRAGMATIC WAYS TO TAME THE LEGACY BEAST

Transforming or modernising legacy systems can feel overwhelming and financially daunting because it's business change that impacts more than just the technology stack. Beyond swapping one tool for another, it's a paradigm shift that requires a new mindset, new skills, and new processes. For example, a profit and loss (P&L) report cannot become "real time" by simply optimising an existing batch report. This will require a new, event-driven architecture.

However, banking leaders can introduce the new architecture and its impact in progressive steps to make it more workable for their teams. The "Big Bang" approach is an option, but a step-stair one works too. Let's look at five ways you can begin to tackle legacy IT issues while adding significant value.

1. Create a 360-degree view of your IT landscape

Begin by assessing your existing systems to understand the lay of the land, identify risks, and establish priorities. At Endava, we have developed a unique approach using bespoke tools and our industry experience to help banks create a 360-degree view of their enterprise architecture. We can help leaders identify the core functions versus support functions.

2. Build in interoperability

The interoperability that comes with modern systems that are based on microservices and application programming interfaces (APIs) is essential for today's business partnerships. We've helped clients build and develop well-designed APIs around existing systems. This allows them to unlock immediate benefits and prepare for a progressive replacement of legacy back-end applications. Combined with low-code platforms and micro front ends, they can quickly bring tangible value to end users, like a unified view of their market exposure or a real-time view of trade processing.

3. Automate where you can

Simple automation is a good way to free up resources. Think DevOps continuous integration and continuous delivery, aiming at automating testing and deployment. On the business operations side, robotic process automation (RPA) can offer a quick win before you perform a more in-depth review of your processes and back-end architecture.

4. Embrace the cloud

Dated infrastructure costs time and money, whereas cloud can save you both if set up and operated in the most beneficial way. The ultimate evidence of the progress of hardware virtualisation is that all major cloud providers now have an offer for mainframe on cloud!

5. Truly use your data

The technology to build an enterprise data platform is mature and readily available. Building a data foundation - whether centralised or as a data mesh - will enable easy but customised and controlled access to the end users. For example, sales staff and traders will be able to generate self-service reports. Business analysts and data scientists will be able to feed valuable insights back to the business - a virtuous cycle engendering further automation and insights via artificial intelligence (AI) and machine learning (ML).

LOOKING AHEAD

Headlines are filled with cautionary tales of companies that have not tackled legacy issues and paid the price. Moving beyond legacy IT, however, is not just about avoiding the woes that come with it. It's about the growth, efficiency, and partnering opportunities that come with digital acceleration.

Look for more coming in this space soon on how to begin that journey in earnest.